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HUMAN RESOURCE MANAGEMENT AND ORGANIZATIONAL PERFORMANCE

Article  in  International Journal of Advanced Research · June 2023


DOI: 10.21474/IJAR01/16940

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ISSN: 2320-5407 Int. J. Adv. Res. 11(05), 872-881

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Article DOI: 10.21474/IJAR01/16940


DOI URL: http://dx.doi.org/10.21474/IJAR01/16940

RESEARCH ARTICLE
HUMAN RESOURCE MANAGEMENT AND ORGANIZATIONAL PERFORMANCE

Lee Khuay Guan Lionel1, Sukhumpong Channuwong2 and Kulpornpath Wongmajarapinya3


1. Doctor of Business Administration (D.B.A.) in Management, Founder and CEO, Biotech Industries Co., Ltd.,
Thailand.
2. Chairman of Academic Committee, Doctor of Philosophy (Ph.D.) in Modern Organizational Management,
Faculty of Liberal Arts, Krirk University, Thailand.
3. Doctor of Philosophy (Ph.D.) in Modern Organizational Management, Founder and CEO, Thai Smile Bus
Company Limited, Thailand.
……………………………………………………………………………………………………....
Manuscript Info Abstract
……………………. ………………………………………………………………
Manuscript History Human resource management is one of the most important components
Received: 20 March 2023 to increase organizational performance. This is because human
Final Accepted: 22 April 2023 resources are the most valuable assets that can drive the organization to
Published: May 2023 grow and prosper, and to be able to compete in the global market. This
paper aimed to study the important components of human resource
management and a linkage between human resource management and
organizational performance based on the literature review. The results
of the study showed that human resource management can help the
organization to elicit and extract knowledge, skill, expertise, talent and
competency of employees to work for the success and growth of the
organization. Without effective human resource management, the
organization cannot run its business to reach its goals and objectives.
Therefore, each organization focuses on recruiting and selecting
knowledgeable, skillful and competent employees and pay them with
fair benefits and compensation to create their organizational
commitment so that that they work to increase organizational
performance. In addition, the organization should train
unknowledgeable and unskillful employees to have more knowledge
and skills required to work for the organization.

Copy Right, IJAR, 2023,. All rights reserved.


……………………………………………………………………………………………………....
Introduction:-
At present, each business organization is focusing on achieving competitive advantage in its business by
continuously improving people, product, price, and internal process. With the vision of organizational leaders,
business investment does not only focus on production process and equipment but also on people. Mello (2010)
found that human resource management is the most important strategy leading to increase competitive advantage
and sustainable growth of the organization. Therefore, human resource managers must pay much attention on the
processes of human resource management such as human resource planning, analyzing the needs for human
resources, and adjustment of workforce at appropriate level so that an organization can adapt itself to be responsive
to the changing environments. Porter et al. (2016) stated that human management is the effective use of human
resources in the organization to respond to the organizational strategy, which can help the organization to reach the
expected outcomes.

Corresponding Author:- Dr. Sukhumpong Channuwong 872


Address:- Faculty of Liberal Arts, Krirk University, Thailand.
ISSN: 2320-5407 Int. J. Adv. Res. 11(05), 872-881

Human resource management has been studied for over 30 years and received much attention for its positive impact
on organizational performance. Several studies indicated a linkage between human resource management and
organizational performance (Katou, 2012; Katou&Budhwar, 2010; Phanwattana& U-on, 2017). In today competitive
environment, each organization needs to improve their performance through seeking and hiring skillful and
competent employees as these employees can drive the organization to achieve its goals. As such, effective human
resource management is considered as one of the best strategies to increase organizational performance and
sustainability (Chang & Huang, 2005; Kazlauskaite et al.2012).

The science of human resource management is the concept evolved from personal management. This is because
personal management has a limited scope focusing on work attendance, absenteeism, retirement and welfare of
employee which does not cover the long-term planning of manpower in the organization. Therefore, the term
“human resource management” has been used to cover the broader sense of managing human resources in the
organization, which includes human resource planning, recruitment and selection of qualified employees, providing
benefits and compensation to employees appropriate with their workload and effort, training and developing
employees to have more knowledge and skill required by the organization, retaining qualified employees to work in
the organization over the long run, conducting work performance appraisal and promoting qualified employees to a
higher position to increase their motivation and inspire them to work for organizational performance. Channuwong
(2014) and Mondy and Mondy (2014) mentioned that human resource management is very much important to the
organizational success, which can be summarized as: (1) Human resource management can drive the organization to
achieve sustainable growth because the process of human resource management can help the organization to have
knowledgeable, competent and qualified employees to serve the need of working in the organization, which can
move forward the organization to achieve organizational goal. (2) Human resource management helps to improve
morale and motivation of employees. When the organization pay fair benefits and compensation to employees based
on their workload and devotion of time and effort, they will be committed to their organization and have
organizational loyalty and commitment. (3) Human resource management can inspire employees to work with
strong effort and energy, and with their full competency based on their various knowledge and skill. (4) Human
resource management can create social sustainability to the country. This is because human resource management
helps to increase work employment and develop life quality of employees. Moreover, it helps to make the country
stable and prosperous in terms of economy and wellbeing of the people.

The factors that enable the organization to manage human resources effectively consist of (1) Commitment.
Employees are committed to the organization and work with full effort and devotion for the success of the
organization. (2) Competency. Employees work with high competency, knowledge and skill relevant to their
assigned jobs, duties, responsibilities, and positions. (3) Cost effectiveness. The organization focuses on investment
cost in human resources which can create added-value to the organization itself (Channuwong, 2008; Kumar &
Thomas, 2003; Soisud&Inbua, 2021).

Human resource management can be classified into two senses. In narrow sense, it refers to the functions and
operations of a single department in a firm that is the human resource or personnel department. In a broader sense,
though, human resource management involves the entire organization, even when a special staff department exists.
After all, general management is also involved in training and developing workers, evaluating their performance,
and motivating them to perform as efficiently as possible. Herman (2001) and Katangchol et al. (2023) found that
the core responsibilities of human resource management consist of human resource planning, recruitment and
selection, training and development, performance appraisal, and benefits and compensation. Trained specialists from
the human resource department are typically involved in carrying out each of these responsibilities. However, the
responsibilities are usually shared with line managers, ranging from the company president who is involved in
overall planning to the first-line supervisors who may be involved in preliminary interview with applicants and in
employee training.

Therefore, human resource management is the most important activity, which can help the organization to gain
qualified employees to work for the organization. Human resource management has been used as organizational
strategy in managing human knowledge, skill and talent to work for increasing organizational performance. This
includes training and developing unqualified employees with necessary skill to work for organizational success.

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Definition of Human Resource Management


Human resource management is a design of management system on manpower to ensure that human talent is
effectively and efficiently used to achieve organizational goals (Mathis & Jackson, 2008). Human resource
management can be defined as (1) the process of recruiting, selecting, acquiring, training, developing, motivating,
appraising and retaining qualified employees to perform the activities necessary to accomplish organizational
objectives; and (2) developing specific activities and an overall organizational climate to generate maximum worker
satisfaction and employee efficiency. Louis and David (1993: 364) stated that “while the owner-manager of a small
organization is likely to assume complete responsibility for human resource management, larger organizations use
company specialists called “human resource manager” to perform the activities in a systematic manner.”

In modern business companies, human resource managers assume primary responsibility for forecasting personnel
needs, recruiting, and aiding in selecting new employees. They also assist in training and evaluation, and administer
compensation, employee benefits, and safety programs which are the important components for running business
(Kumar & Thomas, 2003). Robert and David (2001) defined human resource management as the use of human
resources as the most valuable asset to work for achieving organizational success with the main seven
responsibilities as follows: (1) manpower planning, (2) recruiting and selecting qualified employees, (3) training and
developing knowledge and skill of employees, (4) paying compensation and benefits, (5) providing health and safety
to employees, (6) labor relation, and (7) research in human resources. Donald (1996) stated that human resource
management is an activity in attracting, selecting, training, giving compensation, and retaining talent, skillful and
experienced employees to work for increasing organizational performance so that the organization can move
forward to be the excellent.

Human Resource Planning


“Human resource planning is the process of analyzing and identifying the need for and availability of human
resources so that the organization can meet with its goals and objectives. The main purpose of human resource
planning is to make sure that the organization has the right number of human resources, with the right capabilities, at
the right times, and in the right places” (Mathis & Jackson, 2008). Human resource planning is the development of a
comprehensive strategy for meeting the future needs of human resources in the organization (Cohn, 1998). Human
resource management is the process of acquiring qualified employees to ensure that the organization has the right
number of people with the appropriate skills in the right places at the necessary times (Rosenzweig & Porter,
1998).Planning is crucial because a miscalculation could leave a company without enough employees to keep up
with demand, resulting in customer dissatisfaction and inefficiency of business operation. However, if a company
expands its staff too rapidly, profits may be eaten up by payroll, or the firm may have to lay off people who were
just recruited and trained at considerable expense. Human resource managers should consider forecasting future
staffing needs as an important key part of human resource planning (Jean et al., 2002; Michael et al., 1999).

Human resource planning involves three steps. First, present human resources must be assessed. At this stage,
human resource managers have to determine whether the present work force is appropriate for the firm’s current
needs or whether it is being used properly. Second, the human resource forecast of the future personnel needs must
be conducted. This forecast compares the current employee skills and their projected skills at some future date with
the expected organizational needs at that date. Finally, a program must be developed for meeting future human
resource needs. The forecast serves as a blueprint for training current employees and recruiting new employees to
meet organizational needs as they occur (Mathis & Jackson, 2008; Michael et al., 1999; Wren, 2000). All of these
steps were identified in Figure 1.

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Step 1: Step 2: Step 3:


Assess current Forecast future human Develop human
resource needs resource program for
human resources
meeting forecasted
needs

Evaluate and Revise

Periodically

Figure 1:- Three Steps in the Human Resource Planning Process.

Recruiting and Selecting Employees


“Recruiting is a process of generating a pool of qualified applicants for organizational jobs (Mathis & Jackson,
2008). According to William et al. (2001), recruiting is a set of activities used to legally obtain a sufficient number
of the right people at the right time to select those who best meet the needs of the organization. One would think
that, with a continuous flow of new persons into the work force, recruiting would be easy. But the truth is that
recruiting has become very difficult for several reasons: (1) Legal restrictions such as the Civil Rights Act make it
necessary to consider the proper mix of women, minorities, and other qualified individuals. Often people with the
necessary skills are not available and they must be hired and trained internally. (2) The emphasis on corporate
cultures, teamwork, and participative management make it important to hire skilled people who also fit in with the
culture and leadership style of the organization. (3) Firing unsatisfactory employees is getting more difficult to
justify legally. This is especially true of discharges involving possible discrimination by age, sex, sexual preference,
or race. Therefore, it is necessary to screen and evaluate employee very carefully to make sure that they will be
effective, committed to the organization and work with the organization over the long run.

The human resource manager plays an important role in selecting employees who best meet with the specific jobs.
Because recruiting is a difficult chore that involves finding, hiring, and training people who are an appropriate
technical and social fit, human resource managers turn to many sources for assistance. These include internal
promotions, advertisements, public and private employment agencies, college placement bureaus, management
consultants, professional organizations, referrals, and applicants who simply show up at the office. An interesting
trend in human resource management has been the increase in the number of temporary workers (Milkovich, 2002).

After the job description and job specification are prepared, the next step in the selection process is recruiting
qualified employees. Human resource department uses both internal and external sources to find candidates for
specific jobs. Current organization has a policy of hiring from within – that is, considering its own employees first
for job openings. Since the human resource department maintains a file describing the special skills and other
qualifications of all employees, its records can be quickly screened to determine whether any employees are
qualified for a job opening. Using current employees to fill job vacancies is a relatively inexpensive method of
recruitment that also contributes to employee morale. However, the organization must utilize external sources to
some extent in filling vacancies or in adding new employees for newly created jobs (Mondy&Mondy, 2014;
Thornton, 2001)

Selection is a process of choosing individuals with qualifications needed to fill jobs in an organization (Mathis &
Jackson, 2008). Selection is the process of gathering information to decide who should be hired, under legal
guidelines, for the best interests of the individual and the organization (Solomon, 2000; Thomas & Taylor, 2000).
According to Louis and David (1993), once job applicants are located, the next step is screening them to determine
who is best suited for the job. First, candidates complete an application form that is used to determine whether they

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meet the general qualifications for the position. The form requests information such as name, address, type of work
desired, education, experience, and personal references.

The selection process is an important element in human resource management, which consists of the following six
steps: (1) Completion of an application form. Once this was a simple procedure with few complications. Today,
legal guidelines limit the kind of questions one can ask. Nonetheless, such forms help discover educational
background, past work experience, career objectives, and other information directly related to the requirements of
the job. (2) Initial and follow-up interviews. Applicants are often screened in a first interview by a member of the
human resource department staff. If the interviewer considers the applicant a potential employee, the manager will
supervise the new employee interviews. Such interviews are helpful in testing an applicant’s ability to communicate
clearly, to adapt to a stressful situation, and to clarify his or her goals, career objective, and background. It’s
important that managers prepare adequately for the interview process to avoid selection errors that may have. (3)
Employment tests. Employment tests have been severely criticized because of charges of discrimination.
Nonetheless, some business companies continue to use them to measure basic competencies, to test specific job
skills, and to help evaluate applicants’ personalities and interests. In using employment tests, it’s important that the
test should be directly related to the jobs. This will make the selection process more efficient and often satisfy legal
requirement. (4) Background investigations. Current business company is becoming more careful about
investigating a candidate’s work record, school record, and recommendations. It is simply too costly to hire, train,
motivate, and lose people and then have to start the process over. Background check will weed out candidates least
likely to succeed and identify those most likely to succeed. It is not always easy to obtain this information. (5)
Physical exams. A complete medical background and checkup can help to screen candidates. There are obvious
benefits in hiring physically and mentally healthy people. However, medical tests cannot be given just to screen out
specific applicants. If such tests are given, they must be given to everyone applying for the same position. (6) Trail
periods. Often company will hire an employee conditionally. This enables the person to prove his or her worth on
the job. After a period of perhaps six months or a year, the company has the right to discharge that employee based
on evaluations from supervisors. Such systems make it easier to fire inefficient or problem employees, but do not
eliminate the high cost of turnover.

The selection process is often long and difficult, but worth the effort because of the high costs of replacing workers.
The process helps assure that the people the company hire are competent in all relevant areas, including
communications skills, education, technical skills, experience, social fit, and health (Lawler, 2002; Laabs, 1999).
Current business companies recruit and select people who have the potential to be productive employees. The
company realizes that potential involves effective training programs and proper managerial incentives. The
processes of recruiting and selecting employees are presented in Figure 2.

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Step 6: Pass trial period

Step 5: Take physical exam

Step 4: Submit background records

Step 3: Take employment tests

Step 2: Go through interviewing process

Step 1: Fill out application form

Figure 2:- Six Steps in Recruiting and Selecting Process.

Training and Developing Employees’ Skill and Talent


Knowledge and skill that employees learned and gained from their institutions and former workplace may not be
sufficient to work in the organization. Therefore, training employees in the necessary skill to work with new job and
responsibility is required by the organization (Channuwong, 2014; Katangchol et al., 2023). Training is the most
important human resource management practice for preparing the company to deal with its competitive challenges.
To deal with global, social, and quality challenges, employees must have a well-developed base of interpersonal and
technical skills. For example, the quality challenge requires that employees be trained to use statistical process
control techniques to monitor manufacturing process and service quality (Schuler, 1999). To produce high quality
products and services, provide employees with the opportunity to perform interesting work, and capitalize on
employees’ skills, many companies are beginning to form work teams. Training may be the most important human
resource management practice for preparing the company to deal with its competitive challenges. To deal with
global, social, and quality challenges, employees must have good interpersonal and technical skills such as
communication and conflict resolution (William et al., 2001). Although training process costs much money, but it is
necessary for business companies to have the employees trained and developed to increase organizational
performance.

The organizational leaders must work to make the customers’ vision a reality by developing solutions better than their
competitors. Because the marketplace demands constant improvements, the senior staff must recognize that this goal
cannot be achieved without investments on human resource training, which will enhance the quality and promote
productivity (Mello, 2010). Investment in people is also imperative because success is dependent upon the collective
efforts and talents of team comprising the people in the company throughout the organization, associated vendors, and
suppliers (Peterson & Plowman, 1989).

Training is an immediate corrective action that satisfies the lawsuit settlement and serves the company’s business
strategic plan in promoting employee’s wellness to secure investments in its people. As an organization, the
employee training program will create positive environment as a whole in being socially responsible. As operational
benefits, the training will increase productivity by effectively managing resources, illuminating unnecessary wastes
and conserving reusable (Thomas & Taylor, 2000).

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Giving Benefit and Compensation


Employees work in the organization with their willingness to receive appropriate and fair compensation in exchange
for their job responsibility and workload. Some organizations provide a scholar program that is an educational
program offering absolutely free schooling with no obligation to employees with the intention to prepare its work
force for future competitive business to maintain a long-term employment relation. Key success in maintaining a
long-term employment relationship is to provide employee with an educational and training along with other
competitive benefit (Michael et al., 1999). A benefit is an indirect reward given to an employee or group of
employees for being organizational membership such as retirement plans, vacations with pay, educational
assistance, health insurance and many more programs (Mathis & Jackson, 2008). In addition, some companies
provide Employee Development Program based on a Performance Appraisal System, which the company is taking
seriously to provide advancement opportunity for a long-term employment. Louis & David (1993) and William et
al. (2001) stated that an investment on people is imperative because success of business depends the collective
efforts and talents of team comprising each employee working in the company. Effective human resources can drive
the organization to achieve its goal.

In exchange for their work, employees receive compensation, a combination of payments and some benefits.
Compensation can be categorized as follows: (1) Base pay, a basic compensation than an employee usually receives
such as wage or salary. (2) Wages, payments directedly calculated on the amount of time worked. (3) Salaries,
consistent payments made each period regardless of the number of hours worked. (4) Variable pay, compensation
linked directly to individual, team, organizational performance (Mathis & Jackson, 2008). Employee compensation
is one of the largest operating costs for current business companies. The long-term of a company, perhaps even its
survival may depend on how well the company can control employee costs and optimize employee efficiency.
Several objectives can be accomplished by a carefully managed compensation and benefit program. They include
the following items: (1) Attracting the kind of people needed by the organization with sufficient numbers, (2)
Providing employees with the incentive to work efficiently and productively, (3) Keeping valuable employees from
leaving and going to work with competitors or starting their own competitive firms, (4) Maintaining a competitive
position in the marketplace by keeping costs low through high productivity, (5) Protecting employees from
unexpected problems such as a layoffs, sickness, and disability, and (6) Assuring employees of funds to carry them
through retirement (Schuler, 1999; William et al., 2001).

Appraising Employee Performance


In the current business organizations, all managers must supervise employees. They must remember that one
definition of management is getting work done through others. Therefore, they must be able to determine whether or
not their workers are doing an effective and efficient job, with a minimum of errors and disruptions
(Benjawatanapon et al., 2023;Milkovich, 2002). A performance appraisal is an evaluation of the performance level
of employees against established standards to make decisions about promotions, compensation, additional training,
or firing. Performance appraisals consist of these following six steps: (1) Establishing performance standards. This is
a crucial step. Standards must be understandable, subject to measurement, and reasonable. (2) Communicating those
standards. Often, managers assume that employees know what is expected of them, but such assumptions are
dangerous at best. Employees must be told clearly and precisely what the standards and expectations are and how
they are to be met. (3) Evaluating performance. If the first two steps are done correctly, performance evaluation is
relatively easy. It is a matter of evaluating the employee’s behavior to see if it matches standards. (4) Discussing
result with employees. Most people will make mistakes and fail to meet expectations at first. It takes time to learn a
new job and do it well. Discussing employees’ successes and areas that need improvement is an opportunity to guide
employees to better improve organizational performance. (5) Taking corrective action. The performance appraisal is
an appropriate time for a manager to take corrective action or provide corrective feedback to help the employee
perform his or her job better. The primary purpose of conducting a performance appraisal is to increase employee
performance. (6) Using the result to make decisions. Decisions about promotions, compensation, and additional
training, or firing are all based on performance evaluations. An effective performance appraisal system is a way of
satisfying certain legal conditions concerning promotions, compensation, and firing policies (Kumar & Thomas
2003; Lawler, 2002).

A Linkage between Human Resource Management and Organizational Performance


Peterson and Plowman (1989) stated that organizational performance can be evaluated through the following four
components: (1) Quality of work. The quality of work of employees meets with high standard, which can increase
customer satisfaction and customer loyalty towards the products of the organization. Work quality can increase

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credibility and more satisfaction to customers who receive products and services from the organization. (2) Quantity
of work. A number of products meet with the organizational expectation. Organization can produce a quantity of
products and goods sufficient for serving customers at appropriate level. (3) Effective time management. An
organization can spend appropriate time in producing products and providing service to customers with speediness
and promptness to increase customer satisfaction. New technologies can be applied to facilitate business operation.
(4) Cost of operation. An organization should consider the cost in operating and doing business and spend the
existing resources such as money, man, material, and technology for the greatest benefits of the organization. Chang
and Huang (2005) and Channuwong (2014) found that cost saving is one of the management techniques to increase
profits. In order to gain high profits, each business company tries to save operating cost as much as possible. Several
studies reveal that human resource management can increase organizational performance such as production, profit,
market share, and management efficiency. Michael et al. (1999) and Schuler (1999) found that effective human
resource management consisting of human resource planning, training and development, benefits and compensation,
retention of skillful and knowledgeable employees as well as performance appraisal can increase organizational
performance such as financial performance, marketing performance, operational performance, productivity and
customer satisfaction. Several studies revealed a linkage between human resource management, employee
satisfaction and organizational performance. Elorza et al. (2011) and Park et al. (2003) found that human resource
management can increase morale, motivation and work satisfaction of employees, which leads to organizational
commitment. When employees are satisfied with and committed to their organization, they will dedicate their time
and effort to work for the organization.

Based on the documentary study, it can be concluded that effective human resource management is the strategy to
increase organizational performance, which leads to reach organizational growth, organizational goals,
organizational success and organizational sustainability. A linkage between human resource management and
organizational performance was presented (Figure 3).

Human Resource Management


-Human Resource Planning
-Analyzing Human Resource Needs Organizational Performance
-Recruiting and Selecting Employees -Financial Performance
-Training and Developing Employees’ Skill -Marketing Performance
-Giving Benefit and Compensation -Operational Performance
-Appraising Employee Performance -Productivity Improvement
-Retaining Talent Employees

-Organizational Growth
-Organizational Goals
-Organizational Success
-Organizational Sustainability

Figure 3:- A Linkage between Human Resource Management and Organizational Performance.

Conclusion:-
Human resource management is the process of acquiring, training, developing, motivating, and appraising qualified
employees to perform the activities necessary to accomplish organizational objectives; and developing specific
activities and an overall organizational climate to generate maximum worker satisfaction and employee efficiency.
Employees are the most important components and valuable assets that organizations should take care and pay much
attention on their wellbeing, benefits and compensation so that they are committed to the organization and work to
increase organizational performance. Such attitudes have fueled the rising emphasis on hiring the right people to

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help a company reach its goals and then overseeing the training and development, motivation, evaluation, and
compensation. In order to increase organizational performance, human resource managers of the current company
must figure out and consider how to attract qualified employees from a shrinking pool of entry-level candidates,
how to train less educated, poorly skilled employees, how to keep experienced employees when they have fewer
opportunities for advancement, and how to train employees to become good managers in the future.

The reason that human resource management is receiving increased attention now is because of the major shift from
traditional manufacturing industries to service industries and high-tech manufacturing organizations that require
more technical job skills and problem-solving skills. As in all areas of business, the world of human resources is
changing very quickly. HR managers need to be well informed about the trends in recruiting, compensation,
benefits, training and development, and employee satisfaction. In the past, this required a lot of reading and
networking with colleagues. However, today networking of a different kind makes it easy to find information on hot
HR issues. Several studies revealed that human resources can increase organizational performance and drive the
organization to achieve its goals. Among the four management resources comprising of man, money materials, and
management, man is the most important because man can carry out other resources. Therefore, it can be concluded
that human resource management is the most important management strategy to elicit human skill and talent to work
for the organization and put the right man on the right job for increasing organizational performance.

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